Chocolate retailer Thorntons today blamed “poor trading” in its stores for a 39% slump in half year profits as the firm slashed prices to try to boost dwindling customer numbers.
The high street chain — which also sells its chocolate online, through other retailers and at franchised stores — said profits before tax had fallen to £7.3m in the 28 weeks to January 10, from £11.9m in the same period the previous year.
The company said overall sales were up 1.3% as its website, franchise business and commercial arm all saw growth.
Chief executive Mike Davies said: “Profit was adversely affected by increased promotional activity in response to rapid market decline during the second quarter.”
In a sign that companies have dramatically reduced spending on corporate gifts, Thorntons said that while its website saw a 26% rise in sales to ordinary consumers, a drop in business from companies meant overall revenue grew just 1.3%.
Thorntons did not provide revenue figures for its stores business, but revealed in January that sales were down 4.2% for the 26 weeks to December 27.
“Like-for-like sales in our own stores suffered from the widely reported reduction in footfall on the high street from mid October to mid December, and from the very high level of discounting prevalent from most retailers at that time,” the firm said.
But it added that it was able to clear its Christmas stock before the end of the period.
Mr Davies predicted that a later Easter this year would boost business because of a three week extension to the sales period.
He said the closure of rival Woolworths would also provide “increased selling opportunities”.
And as the firm's property leases expire, he said the company could also benefit from improved deals with landlords.
“With prudent cost management, product innovation and keeping customers at the forefront of our thinking, I am confident we will emerge from the current conditions a stronger, more profitable business,” he added.
Meanwhile, billionaire Mike Ashley's Sports Direct International business reported that its UK stores were continuing to trade well in challenging market conditions.
In an update on trading in the 13 weeks to January 25, the Sports World owner said total sales were 12% higher at £355m, while gross profit rose by £1m to £143m.
Despite the impact of the weaker pound on the cost of US dollar imports, Sports Direct said it remained comfortable with market expectations for underlying earnings of £135m in the year to the end of April.
Sales in the UK retail division, which trades from around 370 stores, were ahead of expectations during the 13 week period, although this was offset by the impact of the weaker pound on profit margins.
Mr Ashley — the owner of Newcastle Football Club — netted £929m in a single day by floating part of the business in 2007, but shares then fell to 90% below the original offer price.